Beginning as a bricks and mortar store in the 1950s, Ikea is now the world’s largest furniture retailer with a turnover of €27bn. The retailer’s priority today is to get closer to its customers through a multi-channel approach that combines digital and traditional methods.
Ikea has four channels – in-store, contact centres, online and mobile – but more than 95% of its sales still come from physical stores.
That does not mean its digital channels are not popular, however. Its website, which is over 10 years old, receives 1.2 billion visits a year, of which 750 million are unique visitors.
“That's more than one in 10 people on the planet,” says CIO Paolo Cinelli. “It’s a very popular place, and it will become even more popular as we’ve started opening up e-commerce.”
Customers have been able to buy online in selected countries for the past five to 10 years, but two years ago the company increased its e-commerce drive and is now selling in 13 countries.
Additionally, it is expanding the range of products available to buy online. Previously, customers could only choose from a couple of thousand products out of its 10,000-strong catalogue – now they have access to at least 70% of products.
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More recently, the retailer launched a range of mobile commerce applications. It already had mobile apps, which allowed customers to browse the Ikea catalogue, but last year it released around 10 apps in various countries. These apps allow customers to buy via their mobile handsets, search store locations and even use augmented reality (AR) technology.
The AR app, produced through a partnership with an IT supplier, allows customers to visualise Ikea furniture in their homes before purchase, by using their smartphone’s camera. It led to good levels of sales activity, as well as a lot of browsing and sharing interest over social media. Cinelli says it has proven its return on investment (ROI) case.
“We also look at ROI in a broader sense, including building customer loyalty and engagement. It’s interesting to us if it’s increased the amount of touch points with the customer,” he adds.
And it is improving the number of touch points with the customer – a priority for Ikea. Cinelli is not bothered so much about which channel a customer chooses to engage through, as long as they are able to interact with the retailer in the way they want to.
Seamless movement between channels
Cinelli says it is important for the customer to move between channels seamlessly, but it is not easy to do. Ikea is still dependent on many of its legacy systems, which can hinder the possibilities of a seamless multi-channel approach.
For example, Ikea’s returns are handled in one particular system, and customer financing in another.
People outside Ikea have been building Ikea mobile apps
“If we were starting from scratch this would be much easier, but we’re not,” says Cinelli. “All of these scattered services make it harder to provide a seamless experience, but we have made a plan to converge these systems. It’s a matter of time – it won’t happen overnight.”
Cinelli wants to integrate the various systems so they work together seamlessly. One system is Ikea Family – Ikea’s loyalty card scheme – which has more than 60 million members on its database.
“It’s a massive asset and service for our customers, and we could do a lot more with it than we do,” he says.
One way he would like to see the loyalty scheme tied up more seamlessly with other systems would be with returns. If an Ikea Family card is swiped at the point of sale, Ikea would then know the customer’s purchase history, meaning a receipt would not be needed should they wish to return the item.
“So we start the conversation on a much higher level,” he says.
Inspiration from the high street
While most of Ikea’s stores are massive out-of-town warehouse buildings with multiples of every product under one roof, the retailer has also dipped its toes into the high street. It has piloted city stores in some countries, such as a dedicated kitchen store in France.
“It’s not easy to make the Ikea model work there,” says Cinelli. “People appreciate finding everything under one roof, as well as the instant gratification of walking out with your stuff. That’s difficult to achieve, if not impossible, in a city store.”
But he says the digital world is opening up possibilities for Ikea to potentially move further into the high street space. While it is still early days for a strategic model, Cinelli has looked at virtual experiences such as Tesco’s virtual subway store in Korea for inspiration. This model allows customers to browse walls with images of products on sitting on shelves while they wait for their train. The “item” has a QR code so customers can scan using their mobile and order via the Tesco app.
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“If you can give a virtual experience and yet complement the logistic network to give a semi-instant or near-time gratification, that may have additional appeal,” says Cinelli.
He says the challenge with these models is shortening the time distance between the purchase action and the delivery of the goods. “Otherwise it’s discouraging,” he says. Customers who have to wait two weeks to receive their Ikea furniture could start thinking they should have just come in-store, or worse, gone to a competitor.
Cinelli notes the Tesco virtual subway store is designed for grocery shopping, which is very much on-the-go, whereas decisions over furniture take more time because customers have to first ensure the item will fit in the home.
“So far, having the stock in store has been a success factor, rather than having to order something in,” he says. “But if you can shorten the delivery time, that problem gets smaller, and that is where the design of the logistic network is going to be a major investment and an opportunity for innovation.”
Cinelli says Ikea has worked with small companies many times. He says he looks to startups for innovation because they often have a unique feature of expertise.
One example is the Ikea Kitchen Planner, which has been available in-store and online for around 10 years.
Customers who wish to buy a kitchen often have to go to a specialist showroom, where someone would mock up a sketch or computer model of the finished design. “What we did with a relatively small company is create a simplified tool that allows any person, without any knowledge, to design their kitchen on kiosks in-store or on the website.”
Unofficial apps can be smarter than Ikea's own developed ones
To accomplish this, Ikea used a specialised niche company. But Cinelli says the challenge is when it comes to scaling up the innovation: “If you wanted to have a planner for the entire home, that could be a challenge for a small company.”
Ikea has also begun looking towards its customers and fans for innovation. Recently, people outside Ikea have been building Ikea mobile applications. Cinelli believes they scrape the Ikea website for data on its thousands of products, as well as store information, and then import the information into a database, which is then used to build an application.
“They’re unofficial, so we don’t recommend them,” he says. “But they can be smarter than our own developed ones, and can be used as a source of inspiration if we believe they have a good idea we could do ourselves.”
The main problem at the moment is if Ikea changes any of the data on its website, the unofficial apps crash, so developers would have to keep constantly looking for changes and adapt their model.
“We have been discussing whether we make the data officially available,” he says. “And inform people about changes upfront – like an Ikea app store for developers. That could be a thought for the future.”